Thursday, August 18, 2011

CPUC Revamp Trying to Kill Advanced Energy Storage?

The California Public Utility Commission (CPUC) is revamping the rules for the Self Generation Incentive Program (SGIP) with a major, and completely inappropriate, performance requirement for Advanced Energy Storage.

The SGIP provides rebates for various on-site distributed energy resources (DER).  Energy Storage was added to the list of DER's several years ago after much work by VRB Energy (the former manufacturer of the VRB-ESS® now made by Prudent EnergyStrategen and Utility Savings & Refund, LLC (US&R).    One requirement of a qualifying Advanced Energy Storage system (AES) was the ability to provide at least 4 hours of energy and be capable of hundreds of daily charge and discharge cycles.  Strategen, representing the California Energy Storage Alliance (CESA), later tried to ease these performance requirements to a single charge-discharge cycle once every three days.  The CPUC relaxed the cycling requirement for fuel cell applications but retained the 100's of cycles performance for wind applications.  In addition, the CPUC required metering for energy storage to record performance - which was not required for other technologies.

However, the CPUC never required the AES to cycle every day or otherwise "perform" to certain criteria, simply to be able to perform.  This was important for the application of AES to the specific on-site load profile of an end-user and the applicable utility tariffs.  For example, if the facility was closed on the weekend, then it would be pointless to charge and discharge the AES during the weekend.  However, if the electric load was widely variable during the day, then the ability to partially charge and discharge repeatedly would help the facility smooth out its load profile and avoid increasing it's demand on the utility system.

The CPUC has been criticized for funding many projects under the SGIP that produced little electric generation, some being abandoned shortly after installation, so they've decided to condition part of the funding on performance (see pg 32 and 68 of the draft).  That may make sense for a traditional generator, like cogen or solar, but is completely inappropriate for storage.  Energy storage "stores" energy, it does not "generate".  Some energy is lost in the charge - discharge process, which is not important if electricity is being shifted from a lower value time period to a higher value period - like a summer night to a summer hot day.

The CPUC is now requiring a 20% capacity factor for storage, which essentially means it must average a discharge of 4.8 hours per day (24 hours per day * 20% = 4.8 hours).This is a major performance change for storage and may further discourage AES installations.  Not only has the performance standard been increased 20% from 4 hours to 4.8 hours of electricity, but cycling every day would cause the installation to lose money.  For example, the E-20 industrial tariff for PG&E has a kWhr charge of $.078 at night and $.087 during the day.  Assuming 70% efficiency for the charge cycle, comparable to pumped hydro, The AES would need 10 kWhrs of electricity at night ($.78) to deliver 7 kWhrs during the day ($.609). This results in a loss of -$.017 per kWhr delivered!

An arbitray performance standard like this disincentivizes AES installations.  Without the imposed standard, the end user will optimize the AES to reduce utility bill demand charges, summer on-peak kWhr costs, improve power quality and reliability, and make the AES available for other grid support services.  Requiring daily cycles, in excess of current capacity requirements, will impose additional costs on the installation and require the AES to be operated nearly half the 24 hour cycle (charge and discharge), thus reducing its availability for other valuable grid services such as demand response or emergency power.

The CPUC haslong  recognized AES as a valuable DER that needs to be encouraged, but imposing new and costly additional requirements will not encourage new installations and may kill-off the necessary demonstration and pilot projects the SGIP is meant to encourage.